Substantive tests of the revenue cycle typically do not provide evidence of which of the following?
A)Sales transactions exist and are properly valued.
B)Accounts receivable exist.
C)The balance in the allowance account is correct.
D)Fraudulent transactions are not included in the financial statements.

Question

Quizplus · Accepted Answer

Substantive tests of the revenue cycle typically provide evidence of the existence and valuation of sales transactions and accounts receivable, as well as the detection of fraudulent transactions. However, they do not provide direct evidence of the balance in the allowance account, as that is based on management's estimate of potential bad debts. The allowance account is more typically tested through analytical procedures or tests of controls related to management's estimation process.

Substantive Tests of the Revenue Cycle Typically Do Not Provide